TOKYO (Reuters) - Japan's Nikkei share average is likely to be capped on Tuesday after surprise weakness in U.S. manufacturing data, although renewed speculation the U.S. Federal Reserve may step in to boost growth could offer support.
U.S. manufacturing shrank in June for the first time in nearly three years as new orders plummeted, with the Institute for Supply Management index of national factory activity falling to 49.7 from 53.5 the month before, missing expectations of 52.0.
"As Europe seems to be stabilizing for now, the focus is now on the state of the global economy but the ISM figures were terrible," said Kenichi Hirano, market analyst at Tachibana Securities.
"Still, what is equally surprising is the resilience of U.S. shares, which suggests investor sentiment remained strong because they link bad data to the chance of the Fed's QE (quantitative easing)," he added.
The Nikkei is expected to trade between 8,950 and 9,100 on Tuesday. On Monday, it closed almost flat at 9,003.48 .N225, after hitting a two-month high of 9,103.79.
Nikkei futures in Chicago closed at 9,040, up slightly from the close in Osaka of 9,030.
Trading on Tuesday was likely to capped at around 9,100, which should draw selling, including from Japanese retail investors, market players said.
>Wall St shakes off factory data; S&P, Nasdaq rise .N >Euro, dollar fall after U.S. factory data <FRX/> >Bonds rise on global growth worries <US/> >Gold inches up after weak U.S. manufacturing data <GOL/> >Oil slips on more signs of slowing economy <O/R>
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Reporting by Hideyuki Sano; Editing by Richard Pullin